The Governor of the Central Bank has told credit unions that they must be prepared to embrace change.
Speaking at the Irish League of Credit Unions annual conference this morning, Gabriel Makhlouf said proposed new legislation currently before the Oireachtas holds strong potential if put to use.
"The Credit Union Amendment Bill provides a significant opportunity for the credit union sector to transform into a community based provider of universal retail banking products and services," the Governor said.
"However, to achieve this, the sector must be prepared to embrace change."
"Restructuring has already resulted in significant beneficial change, including more business and home lending."
The Governor added that the Central Bank urges all credit unions to consider strategic opportunities that restructuring offers to achieve greater efficiency, build resilience, and build scale.
"We support larger asset-sized restructuring solutions to build scale, as well as the continuation of transfers between medium and smaller asset-sized credit unions," he told attendees.
"The process can be challenging, perhaps even daunting. But I believe that those among you who have undertaken such a change would encourage your colleagues to embrace the opportunity."
Once enacted the Credit Union (Amendment) Bill 2022 will enable credit unions to offer a wider range of services, similar to full-service retail banks.
It will allow credit unions to collaborate so that they can compete in the mortgage and SME lending markets.
They will also be able to refer their members to other credit unions to access a service, regardless of whether or not the referring credit union provides the service itself.
"We in turn welcome the opportunity that the new Bill provides smaller credit unions, who choose to remain standalone, to collaborate and refer business to other credit unions, so that all members of any credit union can gain seamless access to the broader range of services that are now being provided within the sector, such as current accounts," said Mr Makhlouf.
The Governor also said it was regretful that the full lending capacity of credit unions was not being utilised.
"Significant capacity exists within the existing limits for further home and business lending," he said.
"At end September 2023, there was total capacity of €2.1bn should all large credit unions take advantage of the increased lending limits available to them."
"Regretfully, there has not been a significant take up of these increased limits. Of the 67 larger credit unions, only 12 have applied for the increased lending limits, and of these 12, nine have already been approved."
"The credit union sector has significant funds to lend. I urge you to utilise the capacity that exists within the existing house and business loan limits, and develop appropriate strategies to grow your loan books prudently."
While welcoming the pace of change in the financial services sector, Mr Makhlouf also said some developments concern him, "like technology-driven new products in the crypto area, which do (in some instances) raise serious questions around sustainability and concerns relating to consumer and investor protection."
"And, at the Central Bank, we see this change continuing at pace and we certainly do not believe that change has reached its final destination."
He also warned that people need to be very careful to avoid the trap of believing that because the financial sector in Ireland and globally navigated the pandemic relatively unscathed, that somehow we can similarly navigate current and expected future turbulence.
"To believe this ignores the fact that the monetary, fiscal and regulatory responses during the pandemic were exceptionally supportive, as central banks, governments and regulators took extraordinary measures to deal with what they reasonably considered to be a once in a century event," he said.
He added the indications are that geopolitical and financial system disruption, the challenges and threats arising from developments in technology and the fragmentation of our financial system are not once off events, but may well be our new norm.
"In these circumstances, the previously seen monetary, fiscal and regulatory responses will not, and cannot be as accommodative going forward," he stated.
